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The French economy is expected to expand by 1.2% in 2015, which is well ahead of the average 0.4% growth recorded over the last three years. Business activity is being boosted by favourable credit conditions and reduced taxes on business, but any notable pick up in employment growth is not expected to materialise until 2016. Investment demand is healthy, but occupiers are cautious, which is limiting take-up levels.
Take-up since January has come to only 801,535 sq.m, a decline of 23% compared with the same period in 2014. On the other hand, the total number of transactions was slightly above last year’s figure, thanks to the steady market for small and mediumsized properties. Demand is more measured in the larger size brackets, with lease negotiations increasingly prolonged. In the first half of 2015, transactions in excess of 4,000 sq.m amounted to total volumes of 325,471 sq.m, a decline of 36% year-on-year and the weakest first half performance in 12 years. The poor availability of Grade A space in core markets is unlikely to be resolved in the short term, with few developers unwilling to commence new projects speculatively. Overall available supply is relatively stable however, with vacancy rates remaining at 6.7% in inner Paris and 7.9% in Ile-de-France. This does mask a strong disparity between asset quality, with new and redeveloped offices accounting for just 25% of the total volume of supply and just 13% in inner Paris.
Source : Cushman & Wakefield
